NON COMPETE FEE

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RAKESH MAHAJAN (Querist)
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04 May 2009 CLARIFICATION ON
A) WHETHER NON COMPETE FEE TAXABLE AS REVENUE RECEIPT U/S 28(VA) OR CAPITAL RECEIPT ?
B) STATUS OF I-T DEPT CLARIFICATION FROM CBDT ON NON COMPETE FEE FOR CARRYING REPUTED BUSINESS NOT EXPLICITLY COVERED IN THE CLAUSE `RIGHT TO CARRY ON ANY BUSINESS ' CLAIMED AS CAPITAL RECEIPT.
C)CASE REFERENCES FOR TREATING NON COMPETE FEE AS CAPITAL RECEIPT SUBSEQUENT TO INTRODUCTION OF CLAUSE VA IN SEC 28
D) LIABILITY TO ADVANCE TAX- PAYABLE ONLY IN THE ADVANCE TAX INSTALMENT DUE DATE SUBSEQUENT TO THE DATE OF RECEIPT IN CASE IT IS TREATED AS REVENUE RECEIPT OR IN THREE INSTALMENTS AS PRESCRIBED AND LIABLE FOR INTEREST ON ADVANCE TAX DEFFERMENT
E) CAN IT BE TREATED AS LONG TERM CAPITAL GAIN CARRYING A LOWER RATE OF TAX ?

taxindiaconnect

taxindiaconnect (Expert)
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05 May 2009 Good query, I will come back to you shortly with detailed answer to this.

Hi I am back. Please see my respose. Please also see my detailed analysis on the subject by visiting my profile.

A) WHETHER NON COMPETE FEE TAXABLE AS REVENUE RECEIPT U/S 28(VA) OR CAPITAL RECEIPT ? – It is a revenue receipt taxable in the hands of the recipient.

B) STATUS OF I-T DEPT CLARIFICATION FROM CBDT ON NON COMPETE FEE FOR CARRYING REPUTED BUSINESS NOT EXPLICITLY COVERED IN THE CLAUSE `RIGHT TO CARRY ON ANY BUSINESS ' CLAIMED AS CAPITAL RECEIPT. – No such clarification.

C)CASE REFERENCES FOR TREATING NON COMPETE FEE AS CAPITAL RECEIPT SUBSEQUENT TO INTRODUCTION OF CLAUSE VA IN SEC 28 ) _ No such Case law so far.

D) LIABILITY TO ADVANCE TAX- PAYABLE ONLY IN THE ADVANCE TAX INSTALMENT DUE DATE SUBSEQUENT TO THE DATE OF RECEIPT IN CASE IT IS TREATED AS REVENUE RECEIPT OR IN THREE INSTALMENTS AS PRESCRIBED AND LIABLE FOR INTEREST ON ADVANCE TAX DEFFERMENT - yes the recipient is liable to Advance tax an accordingly liable to Interest defaults.

E) CAN IT BE TREATED AS LONG TERM CAPITAL GAIN CARRYING A LOWER RATE OF TAX ? – NO

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